Believe it or not, as I have been writing over the course of the last year and warning potential buyers: OUR REAL ESTATE MARKET WAS CHANGING. NOW, the 'TIPPING POINT" is in the past. Recently, I have been predicting a rise in home prices of 20-30%. After reading the below, I am more confident in my prediction! Please read below the latest NEWS from Michael Orr and the Cromford Report.
Market Summary for the Beginning of April
In 2011 we experienced a relatively stable and predictable market with very little price movement. In 2012 we have a market in which dramatic change is not only to be expected, but is already happening. Prices have moved in the single month of March 2012 more than they did in the whole of 2011. In these circumstances it is very difficult to appraise homes accurately, and in many cases appraisals are coming well below current market pricing. Normally this would act as a brake on price movement, but as so much of our market is cash-based, with the buyer waiving the appraisal contingency, the braking effect is less than normal.
Let us look at some basic numbers for March 2012 relative to March 2011. So for all areas & types we record the following:
Active Listings (excluding AWC): 14,175 versus 30,230 last year - down 53%
Active Listings (including AWC): 21,841 versus 37,246 last year - down 41%
Pending Listings: 11,964 versus 12,923 - down 7.4%
Monthly Sales: 8,782 versus 9,952 - down 11.8%
Monthly Average Sales Price per Sq. Ft.: $93.06 versus $82.13 - up 13.3%
Monthly Median Sales Price: $129,900 versus $110,000 - up 18.1%
So we can conclude that supply is down dramatically year over year, while pricing is clearly well up over last year at this time. It is no longer possible to measure demand freely since it is now heavily constrained by the lack of supply. Sales volumes are nearly 12% down on last year, so this suggests at first sight that demand has fallen. However we know that sales numbers would be much higher if more homes were available. That is why multiple bids have become the norm for most properties under $450,000 and this supply shortage means the upward pricing pressure is continuing.
(Michael Orr, the Cromford Report)
Market Summary for the Beginning of March 2012
The supply of homes for sale is now unusually low below $400,000 and it is clear that pricing can no longer be held down by negative sentiment. Consequently prices are rising at an accelerating rate and unlikely to stop rising until a significant additional supply can be found from somewhere. Where this will come from is not yet clear. The developers can only build a relatively low number of new homes in the near term, constrained as they are by the scarcity of experienced construction employees. The banks are receiving only a fraction of foreclosed homes from the trustees, and REO listings are being added to ARMLS at the slowest rate for almost 5 years. More than three quarters of short sale listings are already under contract, leaving only a couple of thousand of short sale listings unspoken for. Bidding at the trustee sales by third parties is intense except for those where the lender opens the bidding at the outstanding loan amount, obviously not interested in selling until they have taken possession. During March we expect 2 out of 3 trustee sales to go to third parties. Prices at the trustee sales are rising fast and many long term professionals are getting outbid by newcomers.
Normal listings are still relatively plentiful, but are being added to ARMLS at much lower rates than usual, so are not even close to making up for the low supply from elsewhere. The only potentially significant new source is if the banks have been holding back sending foreclosure notices to a large number of delinquent homeowners. If this is the case, then the market is telling these lenders: "now would be a good time". There is no shortage of demand to absorb them. Some lenders, notably Wells Fargo, Bank of New York Mellon, US Bank and Green Tree Servicing were indeed stepping up their foreclosure notices in February, but the overall rate of new notices is still considerably lower than in 2011 and unless many other lenders follow suit we cannot expect a significant increase in REOs coming to market. Most likely, any increase in foreclosure notices will result in an increase in short sale supply and third party purchases at auction.
You can see the extremely low new listing rates by looking at this new chart where you can also break the numbers down by geography and this one where you can break them down by price range. January had the lowest number (9,908) of new Greater Phoenix listings we have seen for any January since we started counting in 2001. Even 2005 had 10,415 and in those days new builds and FSBOs were numerous but rarely listed on ARMLS.
February had the lowest number (8,695) of new Greater Phoenix listings we have seen for any Feb-ruary since we started counting in 2001. 2005 had 9,282.
March is not looking any better so far from a buyer's perspective. So we conclude that constrained supply is going to be a severe problem throughout the near to medium term.
We currently count 7,259 sales in February across all areas & types in ARMLS. This is up 1.4% from Feb-ruary 2011 and the second highest February total in the last 12 years. Nothing weak about demand there. Pending listings number 11,782 and are slightly lower than last year, but they are a much higher percent-age of the available supply. The contract ratio is 120.24, a very high reading that compares with 56.1 in March 2011. Given the time of year, the contract ratio is likely to rise to even higher levels, suggesting a very tough time for buyers.
Average sales pricing has moved from $85.15 per sq ft in January to $87.52 in February, a rise of 2.8%(IN ONE MONTH!). Since pending listing pricing has moved from $83.82 to $88.14 over the same period, a rise of 5.2%(IN ONE MONTH!), we expect sales prices to rise even faster during March.
Today the monthly median sales price is $123,525, 13% higher than this time last year when it was $109,000.
Average asking prices for active listings have increased from $129.80 per sq ft on March 1, 2011 to $152.41 on March 1, 2012, an increase of 17.4%. This is exaggerated by the scarcity of low end homes and the relative abundance of luxury homes.
The 55+ areas and luxury market are still much quieter than the rest of the market. However the strong tide of price recovery is starting to rise from the bottom of the market. (Michael Orr, the Cromford Report)
The Phoenix Real Estate Market Update March 2012
The Cromford Report this week released this data breaking out activity by price point:
Below $100,000
• this is a market that is extremely weighted in favor of sellers as supply is down 63% from last year
• the severe lack of inventory has pushed pending listings 17% below last year and the monthly sales rate is 27% below last year
• $/SF sales pricing is up 10.7% from last year and up 2.7% in the last month
• Sales pricing is highest since August 2010
Between $100,000 and $200,000
• this is a market that is extremely weighted in favor of sellers as supply is down 44% from last year
• the severe lack of inventory has pushed pending listings 7% below last year and monthly sales rate is 1% above last year
• $/SF sales pricing is up 4.1% from last year and up 2.3% in the last quarter
• sales pricing is highest since June 2010
Between $200,000 and $400,000
• this is a market that is weighted in favor of sellers as supply is down 25% from last year
• pending listings are 20% above last year
• monthly sales rate is 7% above last year
• $/SF sales pricing is up 2.3% from last year, but flat over the last quarter
Between $400,000 and $800,000
• this is a market that is in balance even though supply is down 14% from last year
• pending listings are 3% above last year
• monthly sales rate is 8% below last year
• $/SF sales pricing is up 5.3% from last year and 3.4% in the last month
• sales pricing is surprisingly strong, and at its highest since June 2009
Above $800,000
• this is a market that is weighted in favor of buyers with supply down 17% from last year
• pending listings 1% below last year
• monthly sales rate is 21% below last year
• $/SF sales pricing is down 8.4% from last year
• sales pricing is still on a slight weakening trend
Be Careful What You Wish For?
The downward trend in active listings suggests we are heading for an unusual shortage of affordable homes for sale. Compared with one year ago, the number of REO listings is down 76%, the number of short sale listings is down 81% and the number of equity or normal listings is down 26%! Could that mean we’ve had too much of a good thing? Hopefully not… only time will tell. So I guess you can’t have everything. 
Current Conditions:
There are 12,459 active single family detached listings this week which is down 784 from two weeks ago. There are 16,037 total residential listings currently active in the MLS which includes condos, patio homes, townhomes and lofts. We are down 255 from two weeks ago.
Phoenix Real Estate Market: Inventory DOWN, List price UP
Where to begin? As I write this, the day prior to Valentines day(Happy love day to you and yours!), our inventory of properties to sell in the ARMLS is half of what it used to be last year. All-in-all, we are seeing very POSITIVE signs in the resale market. Today we have 17,283 units on the market when last year we had 35,556. That is(-18,273) basically +3 months of inventory reduction. Naturally this will put pressure on prices to rise as we have seen in all price ranges under $200,000 and similarly, this price range has a 90 day or less supply of home which signals a sellers market. Anything property under $75k has seen a +6-14% increase in appreciation with the $100k to $150k averaging a +7% increase in appreciation. The month’s supply of homes remains in the 3 month range, yet was at 6 months one year prior. Encouraging any owner that has equity or needs to sell short, the listing success rate of homes has risen over the last year from a mere 60.6% to 75.5%. Another impressive stat is the listing price per square foot average is up from $128.36 to $149.13, a +16% margin. The lender owned supply has dropped to 7.8% from 18.7%. This drop in lender owned inventory is obviously a huge step in the right direction and continuing to defy the logic of a large shadow inventory bomb about to hit our market.
FHA Loan Limits Increase
Effective immediately, FHA loan limits are back to $346,250. They had been dropped to $271,050 in October. The max loan amount will stay at $346,250 until December 31, 2012. This change will apply to all FHA case #'s issued after November 18, 2011. An FHA case # is established by the lender at the start of an FHA loan. Conventional loan limits will remain at $417k
Refinancing Will Become Much, Much Easier
The federal government announced big changes in the Refinance rules for borrowers with loans currently back by Fannie Mae and Freddie Mac. Current Refinance rules give higher rates/fees to borrowers that owe more than their home is worth and completely disqualify borrowers that are more than 25% upside down (a huge problem for Arizona homeowners).
The newly announced refi program claims that both of those issues will be eliminated when they roll out the full details of this program in mid November. The announcement claims that an appraisal will not be required in most cases. Borrowers must not have any late mortgage payments in the past 6 months and cannot have more than 1 late mortgage payment in the past 12 months. The most important requirement of this program is that it only applies to loans that are currently backed by Fannie Mae or Freddie Mac and only applies to loans that were closed prior to May 2009. Here are the websites to check to see if your loan is backed by Fannie Mae or Freddie Mac http://www.fanniemae.com/loanlookup/ and https://ww3.freddiemac.com/corporate/
Rules for Financing Condos
Lending rules have become stricter in the past few years when financing condos with FHA, VA and even Conventional loans. You can go on the FHA website to search for FHA approved condos in a particular zipcode.
https://entp.hud.gov/idapp/html/condlook.cfm
Even if the complex is FHA approved on the websits, lenders still need to verify that less than 50% of owners are investors and the tougher requirement is that no more than 15% of the HOA dues can be more than 30 days delinquent. The investor % and HOA delinquency % requirements apply to FHA, VA, and Conventional loans and can keep even highly qualified buyers from obtaining a loan on a condo
Self Employment Requirement Drops to 1 Year
Conventional loan rules with 20% down have gotten easier for borrowers with non-salary types of income. In the past, borrowers with self employment, tip, bonus, commission, overtime, part time or 2 job income were required to show a 2 year history to be able to use this type of income to qualify. Now, strong borrowers with 20% down can use these income types after only 1 year of history. FHA, VA and Conventional loans with less than 20% down still requires a 2 years history.
Phoenix Arizona Real Estate Market Summary:
I will begin my summary with quotes and information from Michael Orr with the Cromford Report. “Most of the foreclosure tsunuami is past us, perhaps 80%. The foreclosure notices still to come will generate short sales and 3rd party purchases at the foreclosure auction, but relatively few homes will revert to the beneficiaries. We have probably seen over 90% of the REO’s that are to be created by the 2004-2005 real estate bubble and fewer than 10% are yet to come.” (Michael Orr, the Cromford Report) To further emphasize the above commentary, less REO’s will hit our market due to the dramatic increase in the listing success rate of short sales up to 60% from 41% one year ago. Most importantly, “we can reasonably expect to see positive appreciation rates for the market as a whole for at least the next 4 months.” (Michael Orr, the Cromford Report) This is predicted based upon Pending sales prices up from $77 per sq. ft. last quarter to $81 per sq. ft. currently. Active properties (inventory) is down 41% from last year, at 26,655. If you have read my previous market updates, this number includes AWC (homes under contract like a short sale). I would rather use a more accurate Active properties inventory excluding the AWC which is 19,386 down from 38,821 one year ago. It is also important to look at and track our months of inventory. This is down from 6.7 one year ago to 3.7 months supply. Anything under 6 months is a seller’s market. With that said, all price ranges under $400k, have a less than 6 month supply of properties. Summary, “the supply remains low and steady and demand remains high and steady.” (Michael Orr, the Cromford Report) If you would like to meet, please call Justin at 480-330-7426 or e-mail him at phoenixrealestate602@gmail.com
Phoenix Real Estate Housing Trends
Hello! Today I wanted to respond to an e-mail I received....
Thank you for sharing. Who wrote this? Unfortunately, I do not believe the last paragraph. : ) I would love for you to share with whomever wrote this some 'REAL' statistics. See my response below from current and accurate stats.
#1) Appraisers not 'letting' prices increase, NO...FALSE. Prices always lag current market trends due to the use of comps dated in the PAST. Pricing on homes CAN NEVER...WILL NEVER be absolutely accurate due to time. AND...We have emphasized many times that changes in the balance of supply versus demand take a long time to be reflected in changes to pricing. We also will look out of the 'sling shot' rebound as this demand builds and supply reduces creating at sometime in the near future a LARGE jump in appreciation.
#2) This paragraph assumes 'Americans' should buy a primary home as an investment. TRUE and FALSE. The primary reason for purchasing a home is to have a HOME. It is a place to raise a family in a secure environment w/o having to worry about moving or having 'rent' go up.
#3) Loan modifiations, principle reductions, FHA refi's (short refi) and other enticing programs for primary residences will continue to reduce our inventory of foreclosures. Foreclosure sales are ONLY 10% of our current market, down from 18.9% one year ago. Likewise, the CROMFORD MARKET INDEX is up from 88.1 one year ago to 156 today (anything over 100 is a SELLERS MARKET) SALES activity was UP 16% year over year for October. Days invetory is down to 98 from 184 one year ago. We have emphasized many times that changes in the balance of supply versus demand take a long time to be reflected in changes to pricing. This is illustrated by the latest numbers. The supply increased and demand fell during October, yet pricing made the most positive move it has done for at least 15 months, driven by the large reduction in supply over the last 12 months:
■average active listing $/SF - up 2.3% to $139.98 per sq. ft.
■average pending listing $/SF - up 1.8% to $79.65 per sq. ft.
■average monthly sales $/SF - up 1.1% to $80.95 per sq. ft
Below $150,000 recent pricing trends look healthy and on a strong upward trend. Above this point the picture is rather mixed. All but 5 ranges are showing price appreciation for the last 12 months. So why does the overall market number not show price appreciation? The reason is that the sales volume has decreased in the upper ranges so the more expensive homes make less contribution to the overall mix, driving the overall average down.
#4) Who is discussing the people who short sold 2-5 years ago and the 'new' demand this is placing on the market?
I would only encourage people to short sale their home only if they have a hardship. UNDERWATER or UPSIDE DOWN is NOT A HARDSHIP. PERIOD. : )
www.RealEstate602.com PLEASE PLEASE consult with a PROFESSIONAL FULL-TIME REALTOR whom has sold multiple homes in the last few months prior to engaging on your home selling or buying experience. If you would like my professional guidance with a home sale or purchase, please do not hesitate to call me at 480-330-7426 or e-mail me at phoenixrealestate602@gmail.com.
I am happy to sit down with you to discuss your specific situation.
Phoenix Real Estate Market Update September 7th, 2011
First and foremost, the real estate market in Phoenix, Arizona is CONFUSING. The national media ‘HYPES’ shadow inventory and the stock market/economy is stagnant. What MOST fail to understand about the Phoenix real estate market is: there is no new housing inventory, many banks will work out short sales etc. with the 'shadow inventory', BofA, Chase, CITI, etc. are offering homeowners LARGE incentives to short sale, bank owned homes are in HIGH demand with less than one month supply of homes, bank owned homes are sold in bidding wars and over list price, trustee homes sold are selling for too high of a price with too little margin due to investor bidding, 'high' risk notes are sold cheaply to 'wall street' investors whom then have the 'margin' to reduce principle and interest rates (This is a fact! Multiple people have discussed this with me), there has been an uptick in traditional sales in some areas due to price INCREASES, fix and flips are selling quickly in some areas wiping out the original 'wholesale' price and creating a new comp 20% higher, many agents are NOW showing new homes and buyers are considering new homes due to getting bid out multiple times on resale homes. PLEASE TALK TO A FULL-TIME REALTOR like myself prior to formulating your opinion on our local Phoenix real estate Market. Call me at 480-330-7426 or e-mail met at phoenixrealestate602@gmail.com
Sonoran Foothills: Homes for sale increased to 17 yet 13 homes are pending decreasing our absorption rate to less than 1.5 months which ultimately will put pressure on the market for home prices to tick upwards. Active listings range from $76.46 to $155.40 per square foot while pending homes range from $72.61 to $118.56 per square foot. 5 homes sold in August with an average sold price of $88.03 per square foot.
www.RealEstate602.com PLEASE PLEASE consult with a PROFESSIONAL FULL-TIME REALTOR whom has sold multiple homes in the last few months prior to engaging on your home selling or buying experience. If you would like my professional guidance with a home sale or purchase, please do not hesitate to call me at 480-330-7426 or e-mail me at phoenixrealestate602@gmail.com.
I am happy to sit down with you to discuss your specific situation.
Phoenix Real Estate Market Update August 10th, 2011
Wow…another month has passed. The Phoenix Real Estate Market has remained consistent over the previous couple months. If you get bored with numbers and statistics, here is a quick summary: low inventory of active listings, annual growth in sales up 28.8% and annual growth in pending homes up 19.1%. Our active listings are DOWN from one month ago when I wrote my monthly Phoenix Real Estate Market Update. One month ago we had over 21,000 active listings (I did not include AWC listings) and today we have 19,846 active listings (one year ago there were 36,538). Of the total of 19,846 of listings, 15,711 are single family homes. Total pending listings are down slightly to 11,900 from last month’s 12,061, but UP from last year’s 9,988. If you include AWC as pending homes, the total amount of homes ‘under contract’ is 19,687. Total pending homes are almost the exact same as our inventory of active listings. Our current month’s supply of homes is 3.1 months compared to last year’s 6.2.
PLEASE PLEASE consult with a PROFESSIONAL FULL-TIME REALTOR whom has sold multiple homes in the last few months prior to engaging on your home selling or buying experience. If you would like my professional guidance with a home sale or purchase, please do not hesitate to call me at 480-330-7426 or e-mail me at phoenixrealestate602@gmail.com. I am happy to sit down with you do discuss your specific situation.
Time for my MONTHLY MARKET UPDATE
I have been writing about the inventory reduction for MONTHS now and how the local Phoenix housing market is improving dramatically. You can refer to my blog @ http://www.trulia.com/blog/justin_baker/ for my most recent updates and my opinion on our market. I also shared with you approximately one month ago the best summary of our housing market written by Michael McDonald titled, “Signs of Phoenix Housing Recovery…” Michael’s article discusses many economic indicators that are leading towards the Phoenix Housing recovery. Please e-mail me at phoenixrealestate602@gmail.com if you would like me to resend you this article.
As of today, there are 21,060 active listings on the market (you will notice when Michael wrote his article only one month ago we had 32,000 active listings). From real estate experts in the Phoenix area, this number should be around 50,000 for a ‘balanced’ market. Likewise, as a guide, there were 41,924 listings active last year at this time. Pending homes and AWC homes as of today are 20,123. Furthermore, single family active homes is unreasonably LOW at 16,766. KEEP IN MIND, we just came off a RECORD MONTH OF SALES in June with 11,141 closings BEATING the June 2005 closings when we experienced our PEAK. This month may prove to be very similar do to the 20,000+ homes under contract. In a previous e-mail, I sent you an article featured in the Arizona Republic by Catherine Reagor, “Phoenix Housing Market Gaining Ground…” This article is significant because, as you are aware, once the MEDIA begins to write/discuss the good changing housing market, the trends have been relevant for a few prior months.
With the most recent restriction in active listings in the Phoenix market, buyers have had to ‘re-adjust’ their perspective prior to writing a ‘low-ball’ offer. Most ALL listings that are priced well, show well and are in decent condition have multiple buyers’ offers competing against each other.
PLEASE PLEASE consult with a PROFESSIONAL FULL-TIME REALTOR whom has sold multiple homes in the last few months prior to engaging on your home selling or buying experience. If you would like my professional guidance with a home sale or purchase, please do not hesitate to call me at 480-330-7426 or e-mail me at phoenixrealestate602@gmail.com. I am happy to sit down with you to discuss your specific situation.
Buyer Beware!
You, without a doubt have heard this term before. The phrase is normally used to make sure the buyer understands he/she has to investigate all terms and conditions of a sale. HOWEVER, I am going to use this phrase in a different context. I am saying BUYER BEWARE because of the ‘MARKET’ conditions. Our local Phoenix Metro market is NOTHING like the National real estate market. Our local market has seen a consistent reduction in inventory making purchasing a good home frustrating for most buyers. If you are a buyer in our current market, you must be aware of our supply levels. You must understand our demand/supply ratio for Bank Owned/Foreclosure homes and as well as our total supply. I am not wanting to scare anyone, rather I want you to know and understand our current market conditions. If you talk to buyers or anyone else working with buyers, you will hear an underlying principle that they had to submit multiple offers and were in a ‘highest and best’ competitive offer situation for most of the homes they preferred. Most of this can be attributed to the lower supply of foreclosed homes and the high demand for foreclosed homes. At this point in time, there is only a 1.1 month supply of bank owned/foreclosed homes on the market. Likewise, our overall inventory of units for sale in the ARMLS is at 3.2 months supply. Just a quick note: February of 2009 we had an 11.2 month supply of homes. Just 6 months ago, we had a 6 month supply of homes. One year ago, we had 40,960 units for sale in the ARMLS. Today we have 31,227 homes for sale. Unfortunately, this # is not accurate because it includes short sale homes that are ‘Active with Contingency’ (AWC). In basic terms, this is a short sale listing with a contract submitted to the bank. If you take out the short sales classified as ‘AWC’, there are only 23,407 units for sale with 13,483 pending and 9,963 units closed last month. THIS IS NOT THE FIRST MONTH I HAVE DISCUSSED OUR REDUCTION IN INVENTORY! Need an expert representing you that KNOWS THE MARKET CONDITIONS? Call me today at (480)330-7426.
Phoenix Metro housing market Update
As a real estate professional, I get asked about the market by almost everyone who knows I am a REALTOR. Some sample questions: Are homes selling in Arizona? What is the market like? Can I get a home that is listed for $250,000 for $225,000? These are all great questions and I would like to summarize the market. March 2011 represented the 5th highest sales volume in the last 5 years and April was slightly lower than March, however April 2011 represented the 10th highest sales volume in the last 10 years. Inventory levels are down by 22.5% from one year ago and a downward trend in inventory levels began in December 2010 representing a current 18.7% decline since December 2010. Our current inventory level is the LOWEST since March 2009 wich is only a 3.7 month supply of inventory (MSI). This MSI is well below the 4 months of inventory which signifies a sellers market exerting upward pressure on pricing. Foreclosures continue their 17 month downward trend with a 33.2% decline from teh high of 2009. The demand remains steady due to the average and median sales price stagnant or flat over the last year creating great deals for buyers. Likewise, buyers that foreclosed or short sold 3 years ago are NOW BUYING, creating a new demand. So, if you are a buyer, get your offer in quickly. We are seeing multiple offers over list price on properties, specifically under $400k. -Summarized from the ARMLS by JUSTIN BAKER.
Predictions for Housing in 2011
Will housing values increase in 2011? Fortune.com offers both a bullish and a bearish prediction.
The bulls say: Affordability is at its highest level. Billionaire Warren Buffet is among those who believe this is a sign the slump is about to end. Buffet writes: "Prices will remain far below 'bubble' levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits."
The bears say: It’s not over yet. Housing is still overpriced and inventories are enormous, says Daryl Jones, an analyst at investment research firm Hedgeye. Jones warns that home prices could fall another 15 percent to 30 percent because no one is buying.
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